November 26, 2019
Subcontract Management at the Strategic Petroleum Reserve
The Strategic Petroleum Reserve comprises the largest stockpile of emergency crude oil in the world with, as of November 2018, over 654 million barrels. Stockpiles are stored in a series of underground salt caverns located along the coastline of the Gulf of Mexico. The Strategic Petroleum Reserve’s overarching priority is to maintain the readiness of the oil stockpile for emergency use at the President’s direction. Since April 1, 2014, Fluor Federal Petroleum Operations, LLC (FFPO) has managed and operated the Strategic Petroleum Reserve for the Department of Energy. To carry out its objectives, FFPO relies on subcontractors to perform a significant amount of work. As a management and operating contractor, FFPO has the responsibility to administer its subcontracts in accordance with established Federal and Department of Energy Acquisition Regulations. Accordingly, we initiated this audit to determine whether FFPO appropriately administered subcontracts.
Based on our review of seven FFPO subcontracts, we found that FFPO had not always appropriately administered some subcontracts. Specifically, we found that none of our sampled subcontract files were fully and consistently maintained, and invoice approval was not always based on documentation sufficient to validate satisfactory subcontract performance. The issues we identified occurred, in part, because FFPO had not established adequate guidance or sufficient training regarding its subcontract administration.
Management made a series of recommendations to help ensure that the Department properly administers subcontracts and receives the full value of contracted goods and services. These recommendations included updating policies and procedures, while also expanding upon training efforts.
Topic: Management and Administration